Build versus Buy CRM Applications: Or Both?

Here are some straightforward rules of thumb about building or buying applications for managing
customer relationships. They can be helpful if you or someone in your organization decides to
investigate the option to build your own software for CRM versus using mature and proven
commercially available CRM software as a service.

What is Easy to Build

Building a basic account and contact records application is easy. Anybody in IT can do this
quickly in modern development tools. If that’s all you want and you have the IT skills and
available resources, and those resources are not better utilized elsewhere, build might be the
right answer. However, as needs become more complex the risks increase. Costs become harder
to predict as well as timetables for development. Typically technology-poor organizations have
trouble delivering applications in a timely manner. As the complexity of your sales, marketing and
customer support needs increase, CRM application domain knowledge becomes critical as is the
willingness of the end user to spend time with IS defining the requirements. Overtime, the
application becomes harder to maintain as CRM business needs and processes change.
Typically it is never cheaper, easier or wiser to build the equivalent of a leading commercially
available technology from scratch internally.

What is Hard to build?

A full suite that adds forecasting, support cases, marketing, reporting engine, dashboards
components, documents, calendar, now that is hard. That's an extensive data model to get right.

• Having a site where all text data is full text searchable is very hard. It is key for usability.
• Writing an offline client that works is very hard. 90% of homegrown apps fail at this.
• Adding end user controllable data sharing rules is a very difficult problem.
• Making tools so that administrators can customize the application without programming is
very hard.

The Best of Both Worlds: Buy and Build

The best approach is a balance between buy and build. Buying flexible, CRM software as a
service solutions like Salesforce that you can customize and develop to meet your unique needs
gives you the best of both worlds. More organizations are determining that they can quickly and
effectively solve underlying CRM business problems by using on-demand technology.
Salesforce.com solutions enable an organization to quickly deploy applications that are easily
maintainable, flexible, highly usable, scalable, and reliable, and solve real business problems.

Bottom Line: To build a successful internal CRM solution requires a significant amount of
resources in terms of millions of dollars in R&D and man-hours. Building an internal CRM system
that is maintainable, flexible, usable, scalable, reliable, and effectively solves underlying CRM
business requirements is prohibitively expensive and very hard to do. It is never cheaper for a
company to build a CRM system from scratch internally. Companies should consider the
implications before deciding to engage in a risky, untested internal build CRM project. Buying a
proven software as a service solution from salesforce.com that you can customize and develop to
meet your unique needs gives you the best of both worlds.
Supporting Analyst Quotes:

• We expect that by 2012, build-your-own will drop from 70% of all new applications to
55%. Purchased enterprise application suites will decline in popularity as vendors evolve
to provide a more-flexible SOA-oriented, process-based architecture. (Source: Gartner
Inc., Toolkit Decision Framework: The Top CRM Technology Questions to Answer by
2012, April 2007)
• During the next few years, SOAs and the BPP will blur the lines between buy and build,
enabling users to compose new business applications from services and business
process composition technology. (Source: Gartner Inc., Toolkit Decision Framework: The
Top CRM Technology Questions to Answer by 2012, April 2007)

Why Choose Software as a Service (SaaS):

SaaS often can help with faster deployments by shifting the focus away from
customization of the application and database infrastructure, which lengthens
deployments cycles, and toward more configuration of the presentation layer. (Source:
Yankee Group, “Sales and Marketing Executives’ Top Reasons for Using Software and
Service”, Feb. 2, 2006)

The SaaS model allows an organization to cut months off of an application

implementation. In fact, reducing the time to market by four months can increase
benefits by up to 20% in the first two years. (Source: Forrester, The Financial
Economic Impact Of Software-As-A-Service , Sept. 1, 2006).

• By 2011, 25% of new business software will be delivered as SaaS (0.7 probability).
(Source: Gartner Inc., SaaS Delivery Challenges On-Premise Software, 9.26.06)

• SaaS offers potentially better economies of scale. Gartner Dataquest is aware of

situations in which providers that are delivering on the SaaS model today are achieving
11% to 30% reductions in software total cost of ownership (TCO) over five years.
(Source: Gartner, Inc., Dataquest Insight: Service Providers Must Prepare for the
Software-as-a-Service Wave, Dec. 13, 2006)

• New software innovation will be fueled by SaaS during the next four years. (Source:
Gartner, Inc., Toolkit: Determine Which Software Categories Will Be Best Suited for
SaaS, 3.27.07)

• 44% of organisations using a SaaS application have seen an increase in the overall
performance of their business (revenue, customer acquisition, efficiency and sales
conversion) as a result of moving from using on-premise applications to SaaS
applications. (Source: ACA Research, “Software-as-a-Service (SaaS) in Australia: Is it
the Next Big Thing?” Feb. 2007)

• More than 80% of SaaS users reported being satisfied or very satisfied, saying that SaaS
applications meet expectations and business needs; are flexible; improve internal
communications and client service; lower support requirements; and have increased
reliability, functionality and ease of use. (Source: ACA Research, “Software-as-a-Service
(SaaS) in Australia: Is it the Next Big Thing?” Feb. 2007)

• Software as a service offers several advantages to IT buyers, including more frequent

(and potentially less painful) upgrades, a lower cost of ownership (up to 30 percent less
for a CRM implementation, as the exhibit shows), and a higher level of service from
vendors that must become more responsive to customer needs or risk losing subscription
revenues. (Source: McKinsey Quarterly, By Abhijit Dubey and Dilip Wagle “Delivering
 software as a service”, May 2007)

• Low up-front costs and total cost of ownership make on-demand solutions particularly
attractive. (Source: ACA Research, “Software-as-a-Service (SaaS) in Australia: Is it the
Next Big Thing?” Feb. 2007)

About the Author:

We are excited to welcome Wendy Close to the CRM Success team as our CRM success expert.
Prior to joining salesforce.com, Wendy Close served as a research analyst and director in
Gartner’s research organization for over 11 years. During her decade at Gartner, she developed
over 200 research reports on various aspects of customer relationship management from sales
automation to customer experience management to contact center performance management.
She has spoken at numerous CRM conferences and events, has been quoted on the topic of
CRM over 1000 times in various journals and publications, and has provided CRM advice to
many of the biggest and most successful companies in the world. Most recently, Wendy was
Gartner’s lead analyst on customer relationship management strategies, technologies, and
suppliers for midsize businesses, midsize divisions of the large enterprise, and small firms. You
can reach Wendy at wclose@salesforce.com.